Hotels pursue creativity beyond cutting rates

Posted: October 6, 2009 - 8:22am

For Hotels, Creativity Beyond Cutting Rates

By Hugo Martin

Los Angeles Times

LOS ANGELES -- Hoping to keep its 119 rooms filled, the Hotel Erwin on Venice Beach is offering an unusual promotion for its countercultural clientele: an "Ink and Stay" package that includes $100 toward a tattoo and a bottle of tequila to numb the pain. At the Hard Rock Hotel in San Diego, guests who get the "Hard Rock and a Hog" deal can roll through the city on a Harley-Davidson motorcycle that comes complimentary with two nights' stay.

But for hotel perks, it's hard to beat the deal offered at the Four Seasons Hotel Los Angeles, where your stay comes with the free use of a Mercedes, Porsche or a BMW convertible.

As the U.S. hospitality industry struggles through one of the worst financial periods in more than 20 years, hotel managers are moving beyond the usual discounts and offering creative promotions to attract business. Some deals offer big savings for guests, while others are simply meant to generate publicity.

If this all sounds desperate, it's for good reason. Occupancy rates nationwide have been hovering at below 60 percent this summer, the lowest levels since the terrorist attacks of Sept. 11, 2001. Hotel revenues per available rooms have dropped by nearly 20 percent this summer, to less than $60, the steepest dive in 22 years, according to industry reports. Even worse, hotel analysts don't expect the industry to rebound until 2011 or later.

Experts blame the slump on the recession, an increase in hotel openings in the past two years and a dramatic drop in business travel as corporations cut budgets to ride out the economic maelstrom.

Promotions and package deals have long been a staple of the hotel industry, particularly during slow periods. But industry experts say more hotels are now relying on special packages and promotions to survive the recession.

Take the Wilshire Grand Los Angeles, where summer room rates were tied to the high temperature in downtown Los Angeles. Under the "Beat the Heat" deal, if the mercury peaked at 87 degrees, guests booking a room that normally cost $119 paid $87 instead.

The Loews Santa Monica Beach Hotel launched a deal in the spring that allows guests to stay until 6 p.m. the following day, giving patrons an extra six hours from the usual noon check-out time to spend a $75 voucher on a massage at the hotel spa.

But the deals are even better in places like Las Vegas, Dallas and New Orleans, where the tourism industry has been hit harder by the recession and hotel managers are desperate to fill rooms.

At the Las Vegas Hilton, for example, you can stay two nights under the "Fly High and Free" deal and get a $300 voucher for a round-trip flight on any airline, a $100 dinning coupon, two free breakfasts and two free cocktails. When the extras are subtracted from the bill, the room ends up costing about $49 a night.

At the Omni Mandalay Hotel on the outskirts of Dallas, guests can get a deal that includes free breakfast for four, turndown service and the free use of a video camera for a day.

One reason for all the promotions is that hotel owners are trying to draw business without cutting room rates -- a move that could lead to a backlash from customers once the hotels try to raise the rates during better economic times.

"We are seeing a lot of deals and discounts," said Sam Shank, chief executive of dealbase.com, an online search engine for hotel deals. "The hotels are doing anything they can to increase usage without reducing prices."

Not all promotions result in substantial savings for guests. Shank noted that some of the promotions, such as the "Ink and Stay" deal, are meant to draw attention to a hotel.

For example, the tattoo deal at Hotel Erwin starts at $399 per night. But if guests buy the $269 room, $100 tattoo voucher, $20 bottle of tequila and lotion and ice for the pain, the total would come to $404. (Prices for the tequila, lotion and ice were estimated.)

A spokeswoman for Hotel Erwin conceded that the tattoo deal was designed primarily to spark interest in the newly remodeled and renamed hotel.

Although the deal for a free luxury car rental at the Four Seasons Hotel also sounds like a gimmick, the package actually results in a savings of up to $120 a night, compared with the price of getting the room, the car and the other extras separately.

But the best deals seem to be those packages that simply offer a free night's stay.

The Omni Los Angeles has a "Fall Back and Relax" deal that gives guests who stay two nights a third night free, for a savings of up to $143 per night.

Bernjer Agthe, a French tourist visiting Southern California with his friend Emeline Fuge for two weeks, said the package deal they got, including low room rates and free breakfast at a Clarion Hotel in Carson, made a trip to Los Angeles cheaper than staying at home.

"The free breakfast is important to us," Agthe said. "Free Internet is important too so we can send pictures to our friends back home."

Special promotion packages that include free dog toys and discounted tattoos don't work as well on business travelers. But hotel managers say extreme tactics are needed to keep hotels open and workers employed.

"We don't feel like we gave away the farm, but we felt like desperate times call for desperate measures," said Marc Loge, a spokesman for the Wilshire Grand Los Angeles.

He said the "Beat the Heat Deal" helped increase occupancy by about 10 percent this summer.

At the Loews Santa Monica Beach Hotel, general manager Bill Doak said discounts and special packages, such as the "Grrreen Dog Package" for pet owners and the "Rejuvenation, Restoration" deal that includes $75 voucher toward a massage, accounted for about 20 percent of guest sales in the past year.

"Everybody is out to save money," he said. "We need to respond to that if we want to stay in business."